Under what condition can Carvel terminate the Franchise Agreement?
Carvel Franchise · 2025 FDDAnswer from 2025 FDD Document
o meet our then | | | | current Standards | | | | f. | | | | Sign and return your Renewal Franchise | | | | Agreement (which may be materially different from | | | | the terms contained in the Franchise Agreement | | | | attached to this Disclosure Document). | | | | g. Pay the Renewal Fee | | | | h. You and your guarantors and owners must sign a | | | | general release. | | | | i. If you operate a Co-Branded Shoppe, you must | | | | secure the right from the Co-Branded Franchisor to | | | | continue to operate the Co-Branded Franchise. |
| Section in | ||
|---|---|---|
| Franchise | ||
| Provisions | Agreement | Summary If you do not meet these conditions by, and you continue to operate after, the expiration date of the Franchise Agreement, the Franchise Agreement will be extended on a month-to-month basis until such time as (i) the conditions above are satisfied, or (ii) we notify you that the Franchise Agreement is terminated. |
| d. Termination by you | FA: 17.1 | Not applicable, except franchisees may terminate for any grounds permitted by state law. |
| e. Termination by us | Not applicable | Not applicable |
| without cause | ||
| f. | FA: 17 | We may terminate only if you default. |
| Termination by us | ||
| with cause | ||
| g. "Cause" defined - curable defaults | FA: 17.3 | You have 24 hours to cure if: a. You refuse us permission to inspect or audit. b. Any dilution or adulteration of products at the Shoppe, or any misrepresentation, substitution, or palming off of non-Approved Products from the Shoppe operated under the Franchise Agreement. c. You fail to comply fully with all laws. You have 5 days to cure if: a. You sell, barter, or exchange any Proprietary Goods or Approved Products or other proprietary items at wholesale or retail. You have 10 days to cure if: a. You fail to pay any of your debts to us, our affiliates, or others b. You do not obtain personal covenants required under the Franchise Agreement. c. You default under your mortgage or lease. d. You fail to obtain insurance or provide proof of insurance. e. You fail to provide required reports. You have 30 days to cure if: a. You do not maintain the required financial records. b. You fail to meet the Site Approval Deadline or Construction Start Deadline. c. You breach any other provision of your Franchise |
| h. "Cause" defined - noncurable defaults | FA: 17.2 | Agreement. On notice to you: a. You or your Owners violate restrictive covenants |
| CBS: 20.J | or restrictions on use of Confidential Information. | |
| Section in Franchise | ||
| ----------------------------------------------------- | ---------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| Provisions | Agreement | Summary |
| b. You copy or permit anyone else to copy any part | ||
| of the Manuals. | ||
| c. | ||
| You (or any principal of your Entity) are convicted | ||
| of a felony, fraud, etc.; engage in conduct harmful to | ||
| the business, System, or Proprietary Marks; or | ||
| commit a fraud. | ||
| d. You abandon the Shoppe or suspend operation of | ||
| the Shoppe for five or more days without our consent. | ||
| e. Your (or your affiliate's) interest in the lease or | ||
| sublease for the Accepted Location expires or | ||
| terminates or you otherwise lose possession of the | ||
| site. | ||
| f. | ||
| After curing a default, you commit the same or | ||
| similar default again within 12 months. | ||
| g. You become insolvent, become subject to | ||
| bankruptcy, make an assignment for creditors, subject | ||
| to a receiver, have unpaid judgments, subject to | ||
| attachment proceedings or execution of levy, or un | ||
| dismissed foreclosure. | ||
| h. You or your Owners violate, or have any assets | ||
| blocked under, any laws related to terrorism. | ||
| i. You fail to meet the Opening Deadline (or any | ||
| extended deadline). | ||
| j. | ||
| You have an uncured default in any other | ||
| agreement with us or affiliates which would permit | ||
| termination under such agreement. | ||
| k. | ||
| A threat or danger to public health or safety | ||
| results from your continued operation of the Shoppe. | ||
| l. | ||
| You misuse or make any unauthorized use of the | ||
| Proprietary Marks. | ||
| m. If you operate a Co-Branded Shoppe, your Co | ||
| Branded Agreement expires or is terminated, or you | ||
| HES: 20.R. | lose the right to operate the Co-Branded Franchise. | |
| On notice to you (in addition to the defaults in the | ||
| Franchise Agreement): | ||
| a. You fail to comply with the franchise agreement | ||
| for your Host Facility or the franchise agreement for | ||
| your Host Facility terminates or expires. | ||
| b. The Host Facility's brand deteriorates in quality or | ||
| reputation and is damaging the Carvel brand and | ||
| Proprietary Marks. | ||
| i. Your obligations on termination/nonrenewal | FA: 18 ES: 20.I. HES: 20.S., T, U. and V. | a. Stop using the System, including our Proprietary Marks, Confidential Information, Trade Secrets, and Manuals, and de-identify the Shoppe. b. Immediately deliver to us or destroy all materials related to the System and your copies of any of the Manuals. |
Source: Item 17 — Renewal, Termination, Transfer, and Dispute Resolution (FDD pages 84–91)
What This Means (2025 FDD)
According to Carvel's 2025 Franchise Disclosure Document, Carvel can terminate the Franchise Agreement if the franchisee defaults. The FDD outlines both curable and non-curable defaults that can lead to termination.
Curable defaults include issues that the franchisee has a period to resolve. These range from 24 hours to cure for serious issues like refusing inspections or product adulteration, to 5 days for selling proprietary goods at wholesale, 10 days for failing to pay debts or maintain insurance, and 30 days for not maintaining financial records or meeting deadlines. If the franchisee rectifies the default within the specified time, Carvel cannot terminate the agreement.
Non-curable defaults, on the other hand, allow Carvel to terminate the agreement immediately upon notice. These include violations of restrictive covenants, unauthorized copying of manuals, felony convictions, abandoning the shop, loss of the lease, repeated defaults, insolvency, violations of terrorism laws, failure to meet the opening deadline, uncured defaults in other agreements, threats to public health, misuse of proprietary marks, or termination of a co-branding agreement. For franchisees operating a Hosted Express Shoppe, failure to comply with the host facility's franchise agreement or deterioration of the host facility's brand can also result in termination.
It is important for prospective Carvel franchisees to understand these conditions, as any of these defaults, whether curable or non-curable, could lead to the termination of their Franchise Agreement and loss of their investment. Franchisees should pay close attention to compliance with all aspects of the agreement and seek legal counsel if they are unclear about any of these terms.